April 23 (Bloomberg) -- Three months after waving her purse
in front of global finance chiefs, Christine Lagarde filled it
with more than $430 billion in pledges for the International
Monetary Fund. She may not enjoy her victory for long.

The lender’s spring meetings ended yesterday in Washington
with a doubling of its war chest and a number of sores exposed
among its 188 members. Managing Director Lagarde fell short of
her original $600 billion goal as the U.S. declined to chip in,
while Canada proposed making it harder for Europe to tap aid.
Big emerging markets demanded more power at the IMF before
writing checks.

The tensions leave Lagarde pushing her home continent to
justify the show of solidarity with greater efforts to fight the
crisis, as Spain’s interest rates soar and Dutch austerity talks
flop. If Europe resists, she could find it harder to rally
support for sending the region more money or face criticism for
bailing out undeserving governments.

“Any further lending to euro zone economies is likely to
be under even greater scrutiny from the IMF’s other members,”
said Eswar Prasad, a former IMF official now at the Brookings
Institution in Washington. “Lagarde faces a difficult balancing
act.”

Italy, Spain

Concern that Italy and Spain are slowing down in cutting
budgets and overhauling their economies reignited the turmoil,
which prompted Lagarde’s drive to ensure the IMF is able to
protect troubled countries and global growth. Spain’s notes last
week extended their longest decline since 2007 and Italian bonds
rose for a sixth week.

“I need to have the umbrella in case the clouds break into
a nasty rain,” Lagarde told Bloomberg Television.

The euro was little changed, at $1.3181 as of 3:10 p.m. in
Tokyo. Asian stocks headed for a third straight session of
losses, with the MSCI Asia Pacific Index down 0.3 percent.

Lagarde’s fillip still doesn’t lift the combined European
IMF firewalls enough to protect Spain and Italy for long if they
falter, said Megan Greene, head of European economics at Roubini
Global Economics LLC.

“It’s enough to keep Spain and Italy out of the markets for
maybe two years, but not much longer,” she said. “It’s enough
to buy a little time, but not to make a real difference.”

November Rebuff

A former French finance minister and lawyer, the 56-year-old Lagarde was hinting at a need for larger coffers within a
month of joining the IMF in July. After being rebuffed by the
Group of 20 nations in November amid irritation Europe wasn’t
doing enough itself, she resumed her push in January.

She traveled to large emerging markets, and on the stage of
the World Economic Forum in Switzerland showed her handbag to
delegates including U.K. Chancellor of the Exchequer George
Osborne and Bank of Canada Governor Mark Carney.

Lagarde said she had brought her “little bag to actually
collect a bit of money.”

The omens weren’t good as the U.S., the IMF’s biggest
shareholder, balked on the grounds that the lender and Europe
had enough resources and because congressional approval would be
impossible in an election year.

After Europe increased its own defenses and Lagarde pared
her target a breakthrough came when Japan committed $60 billion
on April 17.

“It’s like a dinner,” she told broadcaster Charlie Rose
hours after striking the April 20 deal. “You say to someone
‘why don’t you come because so and so is coming.’ You’re not too
sure that so-and so is coming. And they all come. Japan was
exactly that. Japan did it first.”

Diplomatic Skill

Lagarde’s diplomacy won praise from Jacob Kirkegaard, a
research fellow at the Peterson Institute for International
Economics in Washington. He noted the amount is close to the
unprecedented $500 billion pledge the IMF won in 2009.

“It is a victory for Lagarde,” said Kirkegaard.

It nevertheless came at a price as governments used the
replenishing to raise old and new concerns and set conditions
for helping out.

“Countries that are contributing to the IMF’s resource
boost have become quite explicit about what they anticipate in
return,” said Prasad.

Japan, for one, wants to have a larger say within the IMF
and to send more officials to its Washington headquarters.
Emerging markets, most vocally Brazil, want the U.S. and other
nations to ratify a 2010 deal that would hand them more votes at
the fund, given their increased heft in the world economy.

BRIC Concerns

Some countries “are more enthusiastic about asking money
from emerging markets than carrying out the quota reform,
because these are the countries that will lose,” Brazilian
Finance Minister Guido Mantega said as his nation, along with
Russia, China and India delayed details of their commitments.

The G-20 aimed for implementation of the reforms by an
October meeting in Tokyo and agreed that votes “should better
reflect the relative weights of IMF members in the world
economy.” Change may still not come that fast given the U.S.’s
November election.

“Enticing emerging market support by offering governance
reform is getting to be an old joke, and is tricky to achieve in
the IMF,” said Daniel Heath, a former U.S. alternate director
on the IMF board. Such promises could “risk Lagarde’s future
effectiveness,” he said.

Canada also wants a voting revamp. At present, the IMF’s
24-member Executive Board is dominated by European accents,
causing Canadian Finance Minister Jim Flaherty to suggest a
conflict of interest given 80 percent of the fund’s credits will
be located in the euro area by 2014.

Canada’s Proposal

He wants future loans to Europe to be voted on twice, first
by euro-zone members and then by the rest. He also wants the IMF
to take more control of aid programs rather than monitor them
alongside European authorities through the so-called troika.

Seeking to deflect criticism and maintain flexibility
should more economies need her assistance, Lagarde pressed
Europe not to relax its own rescue efforts. She stressed the
IMF’s money won’t be earmarked for any economy and that future
loans will come with tough conditions.

The IMF’s advice for Europe includes lower interest rates
from the European Central Bank, austerity balanced with measures
to improve growth, having rescue funds inject capital into weak
banks such as Spain’s and selling euro bills to deepen fiscal
integration.

ECB Rebuff

ECB President Mario Draghi nevertheless said in Washington
that “none of the advice that the IMF is offering has been
discussed by” monetary policy makers lately. German Finance
Minister Wolfgang Schaeuble said Europe’s $1 trillion shield
showed “the Europeans have met their commitments.”

There is also the risk that indebted countries backpedal on
reforms if they think there is a stronger safety net, said
Kirkegaard. Italy and Spain have yet to fully deliver their
policy promises, while Dutch Prime Minister Mark Rutte faces the
likelihood of early elections after deficit talks led his
minority government to splinter. France’s presidential election
is going to a May 6 run-off.

“Incentives -- especially political -- are critical,”
said Kirkegaard.